NMW guidance and enforcement – did you know?
03 August 2016
A recent question within the Low Pay Commission consultation on NMW and NLW rates got us thinking about what information can be found on the subject of compliance enforcement within HMRC.
Looking back over recent issues of CIPP Policy News articles – which can be found in the Policy News Journal – we thought we might provide a reminder on where guidance can be found on various aspects of operating and complying with the National Minimum Wage and National Living Wage.
The Department for Business, Innovation and Skills (BIS) has published updated guidance on calculating the minimum wage which includes the new National Living Wage.
The National Living Wage applies to workers aged 25 and over from 1 April 2016. This new rate of pay was introduced through amendment to the National Minimum Wage Regulations 2015 to ensure that the rules that apply to the National Minimum Wage rates for workers aged under 25 also apply to workers entitled to the National Living Wage.
The guidance on calculating the minimum wage therefore also applies to workers entitled to the National Living Wage and covers eligibility, calculation, working hours to be included and enforcement of the minimum wage.
The policy on HMRC enforcement, prosecution and naming employers who break national minimum wage law was updated with changes which came into effect on 1 April 2016.
The Department for Business, Innovation and Skills (BIS) is responsible for National Minimum Wage and National Living Wage policy, which HMRC enforces.
The document on National Minimum Wage and National Living Wage law enforcement sets out the policy civil and criminal enforcement and the policy on naming employers who break minimum wage law.
National Living Wage
The National Living Wage applies to workers aged 25 and over from 1 April 2016. This new rate of pay was introduced through amendment to the National Minimum Wage Regulations 2015 to ensure that the rules that apply to the National Minimum Wage rates for workers aged under 25 also apply to workers entitled to the National Living Wage. In line with the policy set out in the minimum wage law document, HMRC will enforce the National Living Wage as part of the National Minimum Wage framework.
Financial penalty increase
The Government has increased the penalties imposed on employers that underpay their workers in breach of the minimum wage legislation from 100% to 200% of arrears owed to workers. The increased National Minimum Wage penalty came into effect on 1 April 2016. The revised penalty applies to any notice of underpayment relating to a pay reference period beginning on or after 1 April 2016. The maximum penalty is £20,000 per worker. The revised penalty is calculated as 200% of the total underpayment for all of the workers specified in a Notice of Underpayment relating to pay reference periods that commence on or after 1 April 2016. Where this amount would be less than £100, the minimum penalty of £100 should still be applied. Where this amount would be more than £20,000, the maximum penalty of £20,000 per worker should be applied. The penalty is reduced by 50% if the unpaid wages are paid within 14 days.
Naming and shaming
If HMRC investigates an employer that is breaking minimum wage law they will be issued with a Notice of Underpayment by HMRC. This is a formal notice that sets out the arrears of minimum wage to be repaid by the employer together with the penalty for non-compliance with the requirement to pay workers the minimum wage. An information sheet is given to the employer at the start of the investigation which sets out details about the BIS naming scheme. The employer will have 28 days to appeal against the Notice of Underpayment issued by HMRC. If the employer does not appeal or an appeal has been unsuccessful HMRC will refer the employer to BIS for automatic naming under the scheme.
Further details can be found in the policy document on National Minimum Wage and National Living Wage law enforcement.
HMRC have also produced a webinar on the subject of the National Minimum Wage to add to their range of educational material to help employers on the far reaching subject of employment. You can register to receive alerts when a new webinar is scheduled via HMRC subscription service.
The Policy News Journal is updated every two weeks.